Merchant of Record and Yowpay

1. What is a Merchant of Record?

In card and payment processing, the Merchant of Record is the legal entity that:

Is officially registered with the acquirer / EMI / bank
Appears on the cardholder bank statement or payment statement
Is liable for chargebacks, refunds, disputes, and compliance
Is the entity that receives the funds from the acquirer / scheme, before anyone else

In other words, the MOR is the party that the bank and schemes see as “the merchant” for that transaction, even if they are not the one actually providing the product or service to the end-customer.

Classic examples of MOR structures are big platforms and app stores that aggregate thousands of small merchants and then remit funds internally.

2. How PSPs Use the MOR Model

Many PSPs/platforms operate with a structure where:

The PSP is the official Merchant of Record, and
You, the actual seller, are treated as a “sub-merchant” or “platform seller” under their umbrella.

Operationally, that often means:

The PSP opens accounts and contracts in its own name with acquirers/banks.
All sales are processed under the PSP’s single merchant ID or a limited set of MIDs.
Funds from all sub-merchants flow into one or a few pooled accounts belonging to the PSP.
The PSP then reconciles and pays out your share from their internal ledger.

On your website, invoices and statements may show your brand, but on the banking side, the real counterpart is the PSP as MOR — not you.

This can be convenient in the short term… but it comes with structural risk.

3. Where the Risk Comes From When the PSP is the MOR

When the PSP presents itself as Merchant of Record, several risk layers appear that merchants often underestimate.

3.1. Your funds are legally theirs until they pay you out

Because the PSP is MOR, they are the party of record to the acquirer / EMI:

The settlement account belongs to them.
Funds from your customers first hit their books.
Your balance is simply an internal payable in their system.

If they have financial trouble, disputes with their bank, or regulatory issues, your money can be trapped inside that structure. You’re just one creditor among others.

3.2. You inherit the risk of other merchants in the pool

In an MOR model with pooled risk:

One high-risk merchant with chargeback spikes, fraud, or compliance issues
Can trigger increased scrutiny, reserve requirements, or even account closure for the entire PSP.
The bank or EMI doesn’t distinguish you as a separate merchant; they see one Merchant of Record: the PSP.

Result: you can get your payouts delayed, held, or stopped, even if your business is clean, because you’re behind the same MOR umbrella as everyone else.

3.3. You’re easier to “de-risk” and close

Bank or EMI doesn’t like the portfolio? New compliance officer with a stricter view of your vertical? The easiest move for them is:

“Close / restrict the PSP’s merchant contract.”

When that happens:

The MOR relationship is cut at the PSP level.
All sub-merchants lose processing at once.
Funds can be frozen during investigations or wind-down.
You have no direct relationship with the bank to defend your case.

You can be perfectly compliant and still wake up with your PSP “temporarily suspending” you due to “partner bank policy changes”.

3.4. Opacity with regulators and counterparties

Because the PSP is presenting itself as MOR:

Regulators and banks see aggregated risk, not individual merchant profiles.
Some PSPs are tempted to “smooth” or re-label merchant categories to get them accepted.
In high-risk or “sensitive” verticals (crypto, gaming, adult, CBD, etc.), this opacity is exactly what makes banks nervous and leads to brutal derisking decisions.

In short: hiding the merchant behind a MOR PSP may work for a while, but it often increases the probability of a hard stop later.

4. Why Presenting the Real Merchant is Safer

A more robust model is where the merchant is directly visible and contracted at the banking/EMI level:

Each merchant has its own account / IBAN in its own name.
The bank or EMI runs KYC/KYB on the actual business, not only on a PSP umbrella.
Transaction monitoring, risk scoring, and compliance are done with clear merchant-level data.

This has several advantages:

Regulatory clarity – The real seller is known and supervised as such.
Funds segregation – Your balances are your balances, not pooled in someone else’s corporate account.
Lower contagion risk – Another merchant’s issues don’t automatically pull you down.
Negotiation power – You have a direct relationship with the financial institution.

A technical provider can still do orchestration, routing, reconciliation, invoicing, etc. — but without standing in the middle as Merchant of Record.

5. Yowpay’s Approach: Direct IBANs, No MOR in Between

Yowpay is built explicitly not to be a Merchant of Record.

Instead of hiding merchants behind Yowpay’s own account, the model is:

Each merchant gets its own IBAN, opened directly in the merchant’s name with a partner bank/EMI.
The merchant is the true account holder and contractual counterparty at the banking level.
Yowpay provides the payment orchestration and automation layer, not the MOR layer.

That means:

5.1. Direct control over funds

Customer payments in SEPA (SCT / SCT Inst / standing orders, etc.) land directly on the merchant’s IBAN.
Funds are not “owed” to you by Yowpay; they’re already yours, sitting in your own account.
No PSP-level MOR balance sheet risk on your working capital.

5.2. Transparent risk profile to the bank

The bank/EMI knows who you are, what you sell, your jurisdictions, and your volumes.
When regulators or compliance teams review the portfolio, your business is evaluated on its own merits, not hidden behind a generic PSP description.
This drastically reduces the risk of being collateral damage when a platform gets derisked.

5.3. Yowpay as a technology + SEPA orchestration layer

Yowpay focuses on:

Generating and managing dedicated IBANs for your business.
Orchestrating SEPA flows (standard, instant, request-to-pay, etc.).
Providing reconciliation, payment matching, and automation tools on top of those IBANs.
Integrating with your ERP, invoicing system, e-commerce, or platform.

But crucially:

Yowpay is not your Merchant of Record and does not sit between you and your funds.

6. When an MOR Model Makes Sense vs When It’s a Red Flag

To be fair, the Merchant of Record model is not “evil” by design. It’s legitimate and even useful when:

A platform curates and resells digital content, apps, games, or subscriptions under its own commercial umbrella.
The platform takes full commercial and regulatory responsibility for the sale.
End-customers know they are buying from the platform-as-brand (e.g., a major app store).

But it becomes problematic when:

The PSP uses the MOR label mainly to “get around” bank/EMI risk policies.
Merchants in sensitive or high-risk categories are hidden behind generic descriptions.
You as the merchant don’t have a direct contractual or account relationship with any bank/EMI.

If you rely heavily on recurring SEPA flows, B2B invoices, or high-value transfers, tying your cash flow to a PSP-as-MOR structure can become a single point of failure.

7. Key Takeaways for Merchants

If you’re evaluating payment solutions, ask yourself:

Who is the true Merchant of Record?
Is it me, or my PSP?
Whose name is on the IBAN or settlement account?
Mine or the PSP’s?
If the PSP disappears tomorrow, do I still have access to my funds and my account?
Am I being “aggregated” with other merchants under one MOR risk profile?
If yes, am I ready to share consequences if they misbehave?

With Yowpay’s model of direct IBANs per merchant and no MOR in the middle, you:

Keep direct control over your funds,
Are visible and recognized as the actual merchant by the financial institution, and
Reduce the risk of suddenly getting blocked because of decisions taken at PSP level or problems caused by other merchants.